Consumers already decrying higher food prices, will face a higher toll through next year. The flooding across Iowa, Illinois, Indiana and other states will drive up already historically high corn and soybean prices, which will filter into meat, poultry, egg and milk prices along with other much less obvious corn and soybean influenced foods.
Looking at the animal-protein complex, the high corn and soybean prices will force livestock, dairy and poultry producers to cut back. "I have no choice: going broke or increase prices," Heinz Kramer, told the Des Moines Register. Kramer processes pork and beef in a family owned processing company in La Porte City, Iowa. Consumers who shop locally tend to believe that it will cost them less, but as Kramer points out, he will have to raise his prices too.
The days of U.S. consumers spending less than 10 percent of their income for food is probably gone. In some countries, people spend 70 percent of their income on food. The United Nations has identified 22 countries that are especially vulnerable to rising prices because of hunger rates and dependence on imports.
Pork in the U.S. meat case could cost 30 percent more next year because of production cutbacks, notes John Lawrence, Iowa State University agricultural economist. Beef and poultry products are likely to be at least 10 percent higher by year's end. "The higher corn prices go today the higher meat, milk and egg prices will go a year from now," he says.
USDA has projected that food prices would rise by 4.5 percent to 5.5 percent next year. However, that estimate came when corn was $6 a bushel, notes Ephraim Leibtag, USDA economist. Corn prices have moved into the $7.50-per-bushel neighborhood. The food price estimate will likely move higher sometime in July once analysts get a clearer look at corn supplies.
Of course, corn and soybeans are not the only food-price drivers. Wheat prices for example have soared to record levels, and that will have direct retail food price consequences.
The Iowa Farm Bureau estimates that 1.3 million acres of corn and 2 million acres of soybeans will be lost to flooding this year. As a whole, the Midwest could lose 3 million acres of corn. That includes not just land near rivers, but also acreage where farmers couldn't get into fields to plant or couldn't re-plant damaged crops. Researchers who studied crop losses for the widespread and severe 1993 flood, estimate this year Iowa alone will see $2.7 billion in damages. In truth, much of the agricultrual damage will take weeks or months to materialize.
Other factors adding to the overall impact, Mississippi barge traffic has been halted, and likely will be closed or slowed for several weeks, which will further impact grain prices and exports. The United States exports 54 percent of the world's corn, 36 percent of its soybeans and 23 percent of its wheat.
In typical Midwest fashion, Kramer concludes, "The market will find its parity. You have to live with it. It's an uncertain period coming."
That may be, but it will be a harsh reality for U.S. consumers to understand and to accept.
Source: Des Moines Register